Page 287 - IC38 GENERAL INSURANCE

Basis of risk classification

a) Extent of damage likely to be suffered
This is given by the degree of loss and its impact on an individual or
business. On this basis one may identify three types of risk events or
situations:
i. Critical or Catastrophic
Where losses are of such a magnitude; that may result in total loss or
bankruptcy.
Example
 An earthquake that completely destroys a village
 A major fire that completely destroys a multi crore installation
 A situation like the terrorist attack of 9/11 on World Trade Centre which
caused injuries to many people
ii. Major
In which the possible losses may result in serious financial losses, compelling
the firm to borrow in order to continue operations.

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